Cleveland Chapter 13 Bankruptcy Lawyer
There are two types of bankruptcy that apply to individuals in Cleveland, Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 wipes out most of your debts in 120 days, while Chapter 13 is a 3- to 5-year payment plan where you pay back part of your debt and the rest is eliminated.
Chapter 7 bankruptcy is a good fit for many individuals, but Chapter 13 bankruptcy provides unique benefits that make it a better option in a lot of cases. However, before contacting a Cleveland bankruptcy lawyer, it is important to know the benefits of a chapter 13 bankruptcy.
Benefits of Chapter 13 Bankruptcy
Chapter 13 has a lot of benefits that most people in Cleveland considering bankruptcy may overlook. In fact, there are five major benefits to an Ohio Chapter 13 bankruptcy that are explored in detail below.
1. Lower Your Car Payment
If your car payment is hard to manage, this can often be remedied by filing a Chapter 13 bankruptcy. This plan can allow you a new five-year period to pay off the balance owed. It also caps the interest rate at approximately 5%.
In addition, for vehicles that were purchased over 910 days before the filing of your case, the amount you are required to repay on the vehicle is lowered to its current fair market value.
2. Catch Up on Your Mortgage
If your monthly mortgage payment is hard to manage, and you are currently behind on your payments, Chapter 13 bankruptcy provides the opportunity to catch up on these payments over a five-year period. This is a constant whether you are pre-foreclosure, or already in the foreclosure process.
The filing of your case stops everything and is your vehicle to get current and save your residence. Not only can the plan bring you current on your first mortgage, but in some cases, any junior mortgages or home equity lines of credit can be stripped off your home, and treated the same way as your credit cards, medical bills, and other unsecured debts.
Back property taxes and property tax certificates can also be rolled into your plan and paid off over the five-year period.
3. Defer Your Student Loan Payments
Many people currently in the workforce struggle with student loans, and while investing in yourself at a young age is usually the right decision, the lasting effects of large student loan payments are an anchor that drags many young professionals down.
Upon the filing of a Chapter 13 bankruptcy, you are not collectable in relation to your student loans. In essence, you receive a five-year break from them, while you are establishing yourself in your career. In Ohio, and nationwide, your student loans cannot be discharged (except in extreme circumstances) under current federal law; however, during the five-year plan, you make no payments on them.
The creditors simply receive the same percentage that the rest of your creditors are being paid, which is often pennies on the dollar. This payment is made by the trustee in your case.
See more about student loan debt.
4. Extend the Due Date for Taxes
Taxes owed are given priority status in a Chapter 13 bankruptcy, but you are given the same five years to pay them off.
By way of example, if one owes $12,000.00 to the IRS, and the debt was all accrued in the last two years, then this must be paid in full in the plan, but this can be accomplished at a monthly rate of $200.00 to this creditor, all handled by the trustee.
There are also certain taxes that are not treated as a priority in this way. We can discuss this at your initial consultation.
5. Lower What You Owe on Property
For those who own multiple parcels of real estate in Ohio, Chapter 13 bankruptcy can be extremely beneficial. First, mortgages can be crammed down (similar to the car example listed above) to fair market value. This value is usually obtained by way of County Auditor value or a certified appraisal.
If you need a certified appraisal, we can give you a referral to an excellent appraiser with a proven track record and very reasonable fees.